Apple worth more than Google, but so what?

Apple has passed Google in market cap, but unless the company does something …

There was plenty of virtual fist bumping among Apple fans yesterday about the perceived value of Apple as a company now being more than Google, and that's great. And meaningless. One need only look back to late last year and the words of one four-figure analyst to see how ephemeral that measure of value can be.

With about three weeks left until the Keynote at Macworld Expo 2008, the surge on AAPL has just begun. $210 a share is a given, and $225 is certainly possible, while $240 would see the stock nearly tripling its value in a year, but the real question is just how high the stock will go in 2008.

As the chart above shows, the question was answered with a resounding thud. AAPL fell to $120 by February, and has yet to climb back to $200 a share from December. This is despite quarter after quarter of record Mac sales and the spectacular success of the iPhone 3G launch. Further, the only reason Apple surpassed Google in market capitalization is because the latter fell even further, the stock dropping from over $700 to under $450 before recovering to $500. Nonetheless, a comparative list of companies and market cap in billions of dollars is now required.

255.83 Microsoft

158.84 Apple

157.23 Google

135.6 Intel

112.48 HP

71.64 RIM

70.10 Nintendo

50.79 Dell

34.48 Sony

24.34 Adobe

.8437 Palm

While it's fun to gloat about Apple being worth three times the value of Dell—ha, ha—don't expect Apple to catch Microsoft anytime soon, if for no other reason than the company can spend a little of its $24 billion in cash to buy back its stock. Of course, Apple has nearly that much cash, but has so far been reluctant to do anything at all with it, and that is where the real story is.

If the masturbatory fantasy merger of every Apple fan were to come true, the company would leverage high-priced stock and break the piggy bank for Nintendo. Put down the tissue, because that's not going to happen for reasons from company culture to cultures of nation-states, not to mention Apple will never have enough cash and stock value to swing that deal. But Apple could buy Adobe.

While there are many reasons such a deal would be bad (disparate company cultures, product overlap, the idea of Apple becoming a major maker of Windows software—shudder), there is at least one good reason. The Olympics. Internet viewing requires Microsoft's answer to Flash, Silverlight, which is not yet available for PPC Macs. However, even if it were, or even if the Olympics used Flash, Apple would still be at the mercy of another company for an increasingly important means of video distribution. The fight over Flash on the iPhone shows just how serious Apple is about the issue. While Adobe continues to develop Flash for the iPhone, Apple continues to refuse to allow it. Purchasing Adobe would give Apple control of the dominant method of video distribution now, as well as a legal monopoly of the market for creative content production software.

As the money continues to flow in and AAPL's value rises ever higher, pressure will grow from the investment community to do something with it, and that's if it lasts. If not, it's just another growth company following the indexes. Perhaps it would be better to get something for that value now, like control of video distribution method over the Internet for the next decade.